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The role of cognitive complexity and risk aversion in online herd behavior

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Abstract

This paper investigated the role of information related, social and customer characteristics in public information adoption tendencies of online customers to result in herding in e-commerce. E-commerce platforms contains numerous online reviews about products which have the potential to influence customers. We applied structural equation modeling and a 2 × 2 scenario experiment to empirically verify the effect of a few factors in creating online herding. Two levels of cognitive complexity (simple, complex) and risk aversion (risk averse, risk taker) formed the 2 × 2 factorial design. The study's primary finding was that a person with simple cognitive structure and risk avoidance tendency may exhibit higher intention to adopt public information and engage in herding. Information specific attributes contributed maximum towards information adoption and herding. Among sociological variables, only reputation concern significantly predicted both information adoption and herding. Theoretically, the study offered a framework to explore herding intentions online and augmented the observations from the information adoption model. The quality of concise information from credible sources significantly instigates adoption of public information contained in online reviews. From the perspective of marketers, having a better understanding of herding behaviors and its mechanisms can enable the e-commerce platform to reduce herding’s erosion on the wisdom of the crowd by optimizing its information structures (i.e., public information, private information, etc.).

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Author information

Authors and Affiliations

  1. Department of Management, Kochi Campus, Amrita Vishwa Vidyapeetham, Kochi, India

    G. Rejikumar & Sofi Dinesh

  2. Marketing Management, Indian Institute of Management Amritsar, Punjab, India

    Aswathy Asokan-Ajitha

  3. Life Insurance Corporation of India, Cherthala, India

    Ajay Jose

Authors
  1. G. Rejikumar
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  2. Aswathy Asokan-Ajitha
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  3. Sofi Dinesh
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  4. Ajay Jose
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Corresponding author

Correspondence to G. Rejikumar.

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No conflict of interest exists.

Appendices

Appendix 1

1.1 Scenario-1 (cognitive Simple vs risk averse)

“You spend time on social media and other online platforms to gather information from reviews to make an online purchase decision. Mostly, you find reviews helpful and accept such information to make decisions without much evaluations about correctness and avoid the risk of committing mistakes by taking decisions against the majority”.

1.2 Scenario-2 (cognitive simple vs risk taking)

“You spend time on social media and other online platforms to gather information from reviews to make an online purchase decision. Mostly, you find reviews helpful and accept such information to make decisions without much evaluations about correctness but prefer to make decisions based on own judgments”.

1.3 Scenario-3 (cognitive complex vs risk averse)

“You spend time on social media and other online platforms to gather information from reviews to make an online purchase decision. Mostly, you find reviews helpful but search for more private information for detailed evaluations but ultimately avoid the risk of committing mistakes by taking decisions against the majority”.

1.4 Scenario-4 (cognitive complex vs risk taking)

“You spend time on social media and other online platforms to gather information from reviews to make an online purchase decision. Mostly, you find reviews helpful but search for more private information for detailed evaluations and will prefer to make decision based on own judgments.

Appendix 2 (survey instrument)

Dear Respondent,

The scenario provided below narrates an online buying decision-making process. You may kindly visualize yourself in the scenario and cast your position on following questions on a scale varying from “strongly disagree” to “strongly agree.” (Tick in the appropriate box).

“You spend time on social media and other online platforms to gather information from reviews to make an online purchase decision. Mostly, you find reviews helpful and accept such information to make decisions without much evaluations about correctness and avoid the risk of committing mistakes by taking decisions against the majority”.

No.

Statements

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

1

I feel online information that imparts knowledge are credible

     

2

I feel online information shared out of expertise on the matter are credible

     

3

I feel that to adopt online information, its contents should be trustworthy

     

4

I think online Information is credible if many others share the same feeling

     

5

I feel online information should be complete to consider adopting it

     

6

I feel online information should meet the objective of information search

     

7

I feel online information should be believable to consider adopting it

     

8

I feel online information should be complete to consider adopting it

     

9

Others will not respect me if I commit a mistake

     

10

My colleagues will not trust me if I commit mistakes

     

11

Others will not consider me an expert in quality decisions if I commit mistakes

     

12

others will challenge my integrity if I commit mistakes

     

13

I will be contributing to society by accepting the majority opinion

     

14

I will enjoy equal social status by accepting views of majority

     

15

My importance in society will increase by accepting majority views

     

16

I can influence others by accepting their opinions

     

17

I feel everyone will agree to my decisions if I follow majority

     

18

I am flexible to adopt other’s views in my decisions

     

19

If I go with the majority, chances of complaints are less

     

20

I feel more confidence by accommodating other’s views

     

21

I consider other’s views in my decisions

     

22

I will be motivated to share information that I find useful

     

23

I generally trust information if many people share it

     

24

I like to use popular online reviews in my decision-making

     

25

I will follow the majority in my decisions

     

26

I feel that accepting views of the majority is riskless

     

27

I feel that accepting views of the majority is safe

     

28

I feel that accepting views of the majority is beneficial

     

29

I felt the situation described in scenario as realistic

     

30

I had no difficulty imagining myself in this situation described in the scenario

     

31

I prefer to make decisions by trusting public information available online

     

32

I prefer to avoid risk by accepting majority decision rather than going independently

     

Name:

Gender:

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Rejikumar, G., Asokan-Ajitha, A., Dinesh, S. et al. The role of cognitive complexity and risk aversion in online herd behavior. Electron Commer Res 22, 585–621 (2022). https://doi.org/10.1007/s10660-020-09451-y

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